1. Prepare vertical (common size) statements for the balance sheets (4 years) and income statements (5 years) in the tabs below. Use Excel formulas to make your calculations and round your answer cells to 3 decimal places. Use total assets on the balance sheet and net revenue on the income statement for each year as the denominator of your calculations. 2. After completing your calculations in #1, compare the years and note any unusual changes that occurred over the periods. Very small changes are not likely unusual, but even small changes every year can indicate a trend. After analyzing each line item on the two statements, write a memo listing any items you think need further investigation and discuss possible errors or manipulations that might be occurring. List any related accounts that might need investigation. Use the MEMO tab to write your analysis. A B C D E 1 DELL INC. 7 CONSOLIDATED STATEMENTS OF FINANCIAL POSITION 3 (in millions) 4 5 6 7 8 9 Current assets: 10 Cash and cash equivalents 11 Short-term investments 12 Accounts receivable, net Inventories 13 Other 14 15 16 Property, plant and equipment, 17 net 18 Investments 19 Other non-current assets 20 21 22 23 24 25 26 Current liabilities: 27 28 29 30 31 Long-term debt 32 Other 33 34 35 36 Stockholders' equity: 37 38 39 40 41 42 43 44 45 46 Total assets Accounts payable Accrued and other Total current assets ASSETS S 4,232 406 2,586 306 1,394 8,924 913 5,267 366 $ 15,470 LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,989 2,944 8,933 506 1,158 10,597 6,018 (4,539) 3,486 Total current liabilities Total liabilities Preferred stock and capital in excess of $.01 par value; shares issued and outstanding: none Common stock and capital in excess of $.01 par value; shares authorized: 7,000; shares issued: 2,681 and 2,654, respectively Treasury stock, at cost; 102 and 52 shares, respectively Retained earnings uuter cumpreensive incumle Flanel Other Total stockholders' equity Total liabilities and stockholders' equity F January 31, 2003 $ 133 1 (59) 4,873 15,470 G H $ February 1, 2002 3,641 2735 2,269 2783 1,416) 7,877 826 4,373 459 $ 13,535) $ 5,075 2,444) 7,519 520 802 8,841 5,605 (2,249) 1,364 38 4,694 $ 13,535 J K L M N 0 DELL INC. CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (in millions) ASSETS Current assets: Cash and cash equivalents Short-term investments Accounts receivable, net Inventories Other Total current assets Property, plant, and equipment, net Investments Other non-current assets Total assets LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable Accrued and other Total current liabilities Long-term debt Other non-current liabilities. Total liabilities Stockholders' equity: Preferred stock and capital in excess of $.01 par value; shares issued and outstanding: none Common stock and capital in excess of $.01 par value; shares authorized: 7,000; shares issued: 2,769 and 2,721, respectively Treasury stock, at cost; 284 and 165 shares, respectively Retained earnings Other comprehensive loss Other Total stockholders' equity Total liabilities and stockholders' equity P Q January 28, 2005 $ 4,747 5,060 4,414 459 2,217 16,897 1,691 4,319 308 $ 23,215 $ 8,895 5,241 14,136 505 2,089 16,730 - 8,195 (10,758) 9,174 (82) (44) 6,485 $ 23,215 R ST January 30, 2004 4,317 835 3,635 327 1,519 10,633 1,517 6,770 391 5 19,311 S 7,316 3,580 10,896 505 1,630 13,031 6.823 (6,539) 6,131 $ (83) (52) 6,280 $ 19,311 U V 1 2 3 4 5 6 D 7 8 9 10 Net revenue 11 Cost of revenue 12 13 14 15 Operating expenses: 16 17 18 19 20 21 22 (loss), net 23 Income before income taxes and cumulative effect of change 24 in accounting principle 25 Provision for income taxes 26 Income before cumulative effect of change in 27 accounting principle Cumulative effect of change in 28 accounting principle, net 29 30 31 Net income 32 33 Earnings per common share: Before cumulative effect of change in accounting principle: 34 Basic 35 36 Gross margin Selling, general and administrative Research, development and engineering Special charges Total operating expenses Operating income Investment and other income January 31, 2003 35,404 29,055 6.349 3,050 455 3.505 2.844 183 3,027 905 2,122 $ 2.122 $ 0.82 $ H $ I Fiscal Year Ended February 1, 2002 31,168 25,661 5,507 2,784 452 482 3,718 1,789 (58) 1,731 485 1,246 $ 1,246 $ 0.48 K M N DELL INC. CONSOLIDATED STATEMENTS OF INCOME (in millions, except per share amounts) February 2, 2001 31.888 25,445 6,443 3,193 482 105 3,780 2,663 531 3,194 958 2,236 59 S 2,177 $ 0.87 S P Net revenue Cast of revenue Operating expenses: o Gross margin Selling, general, and administrative Research, development, and engineering Total operating expenses Operating income Investment and other income, net Income before income taxes Income tax provision Net income $ $ R January 28, 2006 S 49,205 40,190 9,015 4,298 463 4,761 4,254 191 4,445 1,402 3,043 T S S U Fiscal Year Ended January 30, 2004 41,444 33,892 7,552 3.544 464 4,008 3,544 180 3,724 1,079 2,645 W X 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 Diluted After cumulative effect of change in accounting principle: Basic Diluted Weighted average shares outstanding: Basic Diluted 0.8 0.46 0.82 0.48 0.8 0.46 2,584 2,644 2,602 2,726 The accompanying notes are an integral part of these consolidated financial statements. $ $ $ $ $ $ $ $ 0.81 0.84 0.79 2,582 2,746 Earnings per common share: Basic Diluted Weighted average shares outstanding: Basic Diluted $ $ 1.21 1.18 2,509 2,568 $ $ 1.03 1.01 2,565 2,619 1. Prepare vertical (common size) statements for the balance sheets (4 years) and income statements (5 years) in the tabs below. Use Excel formulas to make your calculations and round your answer cells to 3 decimal places. Use total assets on the balance sheet and net revenue on the income statement for each year as the denominator of your calculations. 2. After completing your calculations in #1, compare the years and note any unusual changes that occurred over the periods. Very small changes are not likely unusual, but even small changes every year can indicate a trend. After analyzing each line item on the two statements, write a memo listing any items you think need further investigation and discuss possible errors or manipulations that might be occurring. List any related accounts that might need investigation. Use the MEMO tab to write your analysis. A B C D E 1 DELL INC. 7 CONSOLIDATED STATEMENTS OF FINANCIAL POSITION 3 (in millions) 4 5 6 7 8 9 Current assets: 10 Cash and cash equivalents 11 Short-term investments 12 Accounts receivable, net Inventories 13 Other 14 15 16 Property, plant and equipment, 17 net 18 Investments 19 Other non-current assets 20 21 22 23 24 25 26 Current liabilities: 27 28 29 30 31 Long-term debt 32 Other 33 34 35 36 Stockholders' equity: 37 38 39 40 41 42 43 44 45 46 Total assets Accounts payable Accrued and other Total current assets ASSETS S 4,232 406 2,586 306 1,394 8,924 913 5,267 366 $ 15,470 LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,989 2,944 8,933 506 1,158 10,597 6,018 (4,539) 3,486 Total current liabilities Total liabilities Preferred stock and capital in excess of $.01 par value; shares issued and outstanding: none Common stock and capital in excess of $.01 par value; shares authorized: 7,000; shares issued: 2,681 and 2,654, respectively Treasury stock, at cost; 102 and 52 shares, respectively Retained earnings uuter cumpreensive incumle Flanel Other Total stockholders' equity Total liabilities and stockholders' equity F January 31, 2003 $ 133 1 (59) 4,873 15,470 G H $ February 1, 2002 3,641 2735 2,269 2783 1,416) 7,877 826 4,373 459 $ 13,535) $ 5,075 2,444) 7,519 520 802 8,841 5,605 (2,249) 1,364 38 4,694 $ 13,535 J K L M N 0 DELL INC. CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (in millions) ASSETS Current assets: Cash and cash equivalents Short-term investments Accounts receivable, net Inventories Other Total current assets Property, plant, and equipment, net Investments Other non-current assets Total assets LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable Accrued and other Total current liabilities Long-term debt Other non-current liabilities. Total liabilities Stockholders' equity: Preferred stock and capital in excess of $.01 par value; shares issued and outstanding: none Common stock and capital in excess of $.01 par value; shares authorized: 7,000; shares issued: 2,769 and 2,721, respectively Treasury stock, at cost; 284 and 165 shares, respectively Retained earnings Other comprehensive loss Other Total stockholders' equity Total liabilities and stockholders' equity P Q January 28, 2005 $ 4,747 5,060 4,414 459 2,217 16,897 1,691 4,319 308 $ 23,215 $ 8,895 5,241 14,136 505 2,089 16,730 - 8,195 (10,758) 9,174 (82) (44) 6,485 $ 23,215 R ST January 30, 2004 4,317 835 3,635 327 1,519 10,633 1,517 6,770 391 5 19,311 S 7,316 3,580 10,896 505 1,630 13,031 6.823 (6,539) 6,131 $ (83) (52) 6,280 $ 19,311 U V 1 2 3 4 5 6 D 7 8 9 10 Net revenue 11 Cost of revenue 12 13 14 15 Operating expenses: 16 17 18 19 20 21 22 (loss), net 23 Income before income taxes and cumulative effect of change 24 in accounting principle 25 Provision for income taxes 26 Income before cumulative effect of change in 27 accounting principle Cumulative effect of change in 28 accounting principle, net 29 30 31 Net income 32 33 Earnings per common share: Before cumulative effect of change in accounting principle: 34 Basic 35 36 Gross margin Selling, general and administrative Research, development and engineering Special charges Total operating expenses Operating income Investment and other income January 31, 2003 35,404 29,055 6.349 3,050 455 3.505 2.844 183 3,027 905 2,122 $ 2.122 $ 0.82 $ H $ I Fiscal Year Ended February 1, 2002 31,168 25,661 5,507 2,784 452 482 3,718 1,789 (58) 1,731 485 1,246 $ 1,246 $ 0.48 K M N DELL INC. CONSOLIDATED STATEMENTS OF INCOME (in millions, except per share amounts) February 2, 2001 31.888 25,445 6,443 3,193 482 105 3,780 2,663 531 3,194 958 2,236 59 S 2,177 $ 0.87 S P Net revenue Cast of revenue Operating expenses: o Gross margin Selling, general, and administrative Research, development, and engineering Total operating expenses Operating income Investment and other income, net Income before income taxes Income tax provision Net income $ $ R January 28, 2006 S 49,205 40,190 9,015 4,298 463 4,761 4,254 191 4,445 1,402 3,043 T S S U Fiscal Year Ended January 30, 2004 41,444 33,892 7,552 3.544 464 4,008 3,544 180 3,724 1,079 2,645 W X 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 Diluted After cumulative effect of change in accounting principle: Basic Diluted Weighted average shares outstanding: Basic Diluted 0.8 0.46 0.82 0.48 0.8 0.46 2,584 2,644 2,602 2,726 The accompanying notes are an integral part of these consolidated financial statements. $ $ $ $ $ $ $ $ 0.81 0.84 0.79 2,582 2,746 Earnings per common share: Basic Diluted Weighted average shares outstanding: Basic Diluted $ $ 1.21 1.18 2,509 2,568 $ $ 1.03 1.01 2,565 2,619